BaucusCare provides incentives to end employer health insurance?

(H/T – Charlie Sykes)

Don’t take my “shocked, SHOCKED” word that the latest iteration of what my co-blogger Shoebox has termed PlaceboCare undermines the rationale for businesses that offer health insurance to continue offering it; take the words of Fortune editor-at-large Shawn Tully:

First, the Baucus bill would substantially increase the costs of coverage, for example by requiring rich benefits packages and coverage for Americans with pre-existing conditions at far less than their actual expense. At some point, employers will decide that the appeal of offering insurance as a tool for recruiting and retaining employees no longer compensates for its soaring cost.

Second, the bill is based on perverse incentives that no one is even discussing. The subsidies it offers to citizens are so rich that if companies were to drop their plans, the majority of workers would get the same lavish coverage, and extra cash in their paychecks to boot. “Those two factors will change the equilibrium,” says (Cato Institute economist Michael) Tanner. “With the government providing huge credits, employers will feel a lot less guilty about dumping their plans.”

In fact, the Baucus bill is practically inviting employers to do just that: It imposes a fine of just $400 per employee on companies that shed their plans.

You may say, “So what?” Tully goes on to explain that a wholesale exit by employers from the health insurance market will by necessity blow the CBO deficit projections of the Baucus versoin of PlaceboCare up because it assumes that the level of employer-provided health insurance will remain constant. The math is too long to excerpt, but suffice it to say that as the number of employees kicked to the “self”-funded and (in many cases, taxpayer-subsidized) exchange curb grows, so does the gap between the cost of subsidizing the coverage of those employees and the additional taxes taken in.

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